What You Need to Do at Year End To Optimize Your 2015 Taxes

2015 taxes

Standing in line at the store the other day – a big one with a red circle as a mascot – I overheard the woman in line in front of me complaining that she shouldn’t have to wait until January to file her 2015 taxes because she always gets $8,000 back and that would be so much better to have at Christmas. It took me a moment to realize that she likes filing her taxes. Many of us do not find filing our 2015 taxes something we want to bother with; not when a check has to be written to the IRS for the amount still due. However, conversations such as this one do bring to our attention the fact that it’s almost time to file those 2015 taxes. Christmas is but two weeks away, and that means only one thing; income tax time. It means getting together our yearly tax information, it means handling a few last minute tax issues that might just help us write smaller checks or even receive a bit of a refund in lieu of owing money when we file our 2015 taxes.

I know you don’t want to spend any time thinking about your taxes now that the holidays are here, but I will remind you that there are just a few things you need to do between now and the dropping of the ball in Times Square on New Year’s Eve to optimize your income taxes and insure that you are able to get the most out of your 2015 taxes before it’s time to file and provide Uncle Sam with a little bit more money for his own pocket. The good news, there are many deductions and many credits many American taxypayers take advantage of each year, so why not stop and spend a few hours figuring out whether or not they also apply to you before it’s time to file your 2015 taxes? Here’s what you need to do by December 31 to optimize your 2015 taxes.

Make Donations

Anything you donate through the year is tax deductible, so now is the time to go ahead and make sure your donations are getting where they need to go. If you have anything to donate, do it now. Whether it’s a donation to your church, to your favorite charity or even just old furniture, clothes or anything that is donation-worthy, get rid of it now. There is a catch, however; you’ll want to make sure that you are getting receipts for your donations so that you are protected in case you are audited.

There are many things you can donate, and many places you can donate. For example, anything from money to clothes to baby items to appliances, furniture and even your old vehicles can be donated. If you have a piece of property or a home that you want to donate to, let’s say the local fire department for practiced burns, you can write that off, too. There are many things we can all do to ensure we get to donate as much as possible. Not only does it give us all a little something back on our 2015 taxes, it also helps those who are less fortunate than the rest of us.

If you are interested in making a donation, you’ll want to know where to make your donations. Your local thrift stores, Goodwills, churches and schools are good starting points, but you want to know how much of your donation is actually being donated; so we can tell you how to do that. Visit CharityNavigator.org to see if the charity you’re interested in is a legitimate charity, and how much of your donation is actually being used to benefit the charity. It’s a wonderful resource for anyone looking to optimize their 2015 taxes by donating, but also for those who are looking to donate throughout the year.

Invest in You

Everyone should know by now that tax-deferred retirement accounts make a great tax tool. These are accounts that allow you to go ahead and invest in your future while also preventing you from needing to pay taxes this year. The more you invest in your tax-deferred retirement accounts, the more you can deduct from your incomes taxes throughout the year. You want to pay as few taxes as possible, and this is how you do that.

If you’re considering contributing to a Roth or Traditional IRA, there is even better news; you can write off anything you provide to that account right through April 15 of 2016 for your 2015 income taxes. Check your account, however, to ensure that you are not exceeding any contribution limits. Exceeding limits means you’re paying taxes on that money right now, which is something you want to avoid doing at all costs.

Reduce your Income

You can’t just ask your boss not to report your income throughout the year; that’s illegal. However, you can ask if you can do a few things to reduce your income for the year. For example, your boss might be happy to present you with your year-end bonus in January so that you have a full year to worry about paying the taxes on that rather than paying them right now. If you are a self-employed type, you might consider waiting just a few weeks to bill your clients so that you won’t receive payment until after the New Year. This means you’ll have a lower income this year so that your tax liability on your 2015 taxes is lower. This means paying fewer taxes and saving more money.

If you want, you can just ask your clients to wait to pay you until 2016, too. It might not work for all of your clients, but it will work for some and they’re usually happy to help when it works for them.

Increase your Withholding

If your problem with your 2015 taxes is that you owe money, it might be that you’re simply not saving enough in withholding. All you have to do to make this right is simply fix your W4. If you can increase the amount you contribute each pay period in withholding, the government will already have that money on file and you will find it’s not necessary to write another check to them when you file your 2015 taxes. However, you don’t want to contribute too much. Doing that only means you have less money in your bank account throughout the year. Sure, you will have a nice tax refund, but don’t you think it’s a bit nicer to simply have more money throughout the year to spend?

Keep Good Records

It’s not too late to go ahead and start with your record keeping. You don’t have to file your income taxes right away, you know. You can wait until the day they are due to e-file or postmark your return to the IRS with no penalty. That gives you approximately 5 months to carve out time each day or week to get your records in order so that filing your 2015 taxes is simple and easier than usual. This also helps you get organized for the following year, and it helps to prevent you from rushing to gather information that might make you more inclined to make silly mistakes and cause yourself some income tax issues.

Utilize your FSA

Anyone with an FSA (Flexible Spending Account) associated with your health insurance plan needs to go ahead and spend what is left in there. The rules are different for everyone, but most FSA money that’s not used before the end of the year is gone. You lose it; and that is not something you want to happen to your hard-earned money. This is money that has to be spent on health-related purchases, and you probably cannot roll it over into next year – but you will need to ask your employer what you have to do to make it work. You can either roll over up to $500 or you can use a grace period of a few months to spend this money in the next few months.

However, you need to do it; otherwise, you lose it. If you are not sure how to use the money in your FSA in the next few weeks, we have a few suggestions.

  • See the optometrist
  • Buy new prescription glasses or contacts
  • See the doctor
  • See the dentist
  • Ask for a prescription for your meds that you use all the time (asthma medication is a good one) from your doctor
  • Buy first aid kits
  • Buy sunscreen

Check to see what else you can purchase with your particular account so that it meets all the requirements and qualifications.

You have only a few more weeks to optimize your 2015 taxes, which means there is no more time to procrastinate on anything that you might currently need. In fact, you need to get to work now so that you can get this stuff handled as soon as possible. Check with your employer, your HR department and your own records to see what you need to do, what you can do and what you can’t do to optimize your income taxes for 2015 before it’s too late to do anything about it.

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